The Business Press Maven
Maven: Pfizer's Painful Spin
By Marek Fuchs
Special to TheStreet.com
12/4/2006 12:17 PM EST
URL: http://www.thestreet.com/newsanalysis/maven/10325720.html
If you are anything like the many readers who emailed The Business Press Maven this weekend, you are probably wondering if I'm possessed of some sort of mystical energy field that allows me to see the business future, especially those times when the fatheads of business media can't even see the recent past.
The answer, at least when it comes to Pfizer (PFE), is apparently yes. I have mystical powers.
But my startling clarity aside, let's look at what has happened to Pfizer over the past week and why it shows both how you should avoid the stock until further notice (issues of trust and competence -- see: the lack thereof -- abound) and, more importantly, how you cannot make any investment decision without a firm understanding of what the business media are thinking, doing, writing and saying about your company -- and why.
It is an ancient foundation of Business Press Maven thought and has never been made clearer in such short order: If there is a spread between the published perceptions of the business media and reality, reality will always win out. Though admittedly, not always as quickly as it did in the case of Pfizer.
The Pfizer train wreck left the station on Tuesday, when the company announced that it was laying off 2,000 salespeople, about 20% of its once-vaunted force. Though the kind hearts on Wall Street usually cheer layoffs for the cost savings involved, there was a sense here, well deserved, that a change in era was being signaled. Pfizer, like many of the drug companies, had always ridden its sales force to reliable success.
Typically, adding to a sales force was a harbinger of increased future sales. Now, with flat revenue looking out as far as the eye can see, thanks to disappearing patents with nothing to replace them, Pfizer had probably, Wall Street saw, become that most endangered beast: one that could move forward only if it cut costs well enough.
Could there have been an upside besides cost cuts going on with the employment cuts? Sure. Or maybe. But Pfizer had some 'splainin to do.
Instead of 'splainin, Pfizer started spinning. In fact, it took spin to the level of performance art on Thursday, just two days after the announcement of layoffs, when company management spoke with surefootedness to assembled analysts, reporters and investors at a research facility, touting the greatness of its drug pipeline, using language that would appear comical only two days later.
As The Business Press Maven made clear, this was treading dangerous territory. The drug approval process is always a bit of a crapshoot, especially for a company like Pfizer that had done such soft trade in approvals in the past decade. To speak with such large-scale excitement about future developments, even talking in vaguely vain terms of a "hunger for more," as Pfizer's CEO Jeffery Kindler, now facing a future of less, famously did, was foolhardy.
But the real fools, as I pointed out, were the business media. They essentially wrote about Thursday's meeting with washrags over their eyes, not pressing -- or, in most cases, even touching -- the point that if things were so good on Thursday, why the desperate move on Tuesday? If all these drugs are really coming down the pipeline, uh, won't you need people to sell them?
Forbes swallowed Pfizer's claims hook, like and sinker. It published articles titled "Six Pfizer Drugs to Watch" and "Pfizer Fights Back."
The real answer, of course, came Saturday when Pfizer announced that it was forced to stop development of torcetrapib, its showcase, big-ticket good-cholesterol drug, because it was killing people.
Though I cannot imagine how Pfizer officials did not know by Thursday that torcetrapib was at least causing enough higher blood pressure to temper their excited talk, I'll leave it to others to figure out what they knew and when they knew it.
The larger point is that when there is a spread between the business media's perception of events and reality, it means that there is a clear and present danger for investors.
And investors are the ones left holding the bag. The business media fatheads just ride the other side of the story. What, you ask, is Forbes writing today?
"Behind Pfizer's Failure."
The danger to investors, in this case, came neatly packaged within a week. But when companies try to manage and massage news and the fatheads of the business media do not note underlying truths, such is always the end result.
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